Testimony of Joshua Rosner
Subcommittee on Capital markets and Government Sponsored Enterprises:
Fannie Mae and Freddie Mac: How Government Housing Policy Failed
Homeowners and Taxpayers and Led to the Financial Crisis:
10:00 a.m. March 6, 2012
Room 2128 Rayburn House Office Building
As you will see in my testimony, the GSEs, which were originally government agencies intended to provide liquidity to the secondary mortgage market, were repurposed by the Clinton administration to direct social policy through the housing and mortgage markets. The combination of using the GSEs as “tools”2 of social policy and falling interest rates built the foundation of the housing bubble by supporting acceptance of low-? and no-?down payment loans, lower FICO scores, higher debt-?to-? income and loan-?to-?value ratios. These “benefits” are exemplified by the 1999 comments of Fannie Mae’s Chairman that “a record of prompt utility bill and rent payments can be substituted for the traditional credit report to verify a potential borrower’s willingness to pay a mortgage loan”.3
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